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Several decades ago, a law was passed to ensure that wealthy individuals, who could claim many itemized deductions and tax-sheltered transactions, paid at least some minimum tax each year. It was called the Alternative Minimum Tax (AMT). This tax was not indexed to inflation, so now it is about to affect 23 million unsuspecting middle-class taxpayers with unintended higher taxes as a result. Another 25 million taxpayers will face higher taxes because several credits, such as the child tax credit and ten other such credits expire at the end of 2007. You may be among those affected.

For years Congress has been aware of this problem and has passed an annual patch in the law to extend the credits so that unintended taxpayers would not be affected by AMT. The number of potential taxpayers falling victim to AMT has grown so dramatically that a more complex fix is required this year. Unfortunately, Congress can’t agree on how to remedy this situation, so it appears that it could be late this year or early in 2008 before this happens. This will cause a delay in tax return processing. It will take the IRS up to ten weeks to prepare its system for a fix, making it potentially unable to accept individual returns until mid-February or early March 2008.

This news may come as a disappointment to you, especially if you are expecting a refund, but please know that as your tax advisor I am committed to staying on top of this issue and will continue to give you honest information and keep your best interest in mind. My suggestion is that you schedule an appointment with me to go over your filing materials. It is a priority to me that your return is ready to file as soon as it becomes possible to do so.

If you have any questions regarding this or any tax issue, please contact me. As always, it is my pleasure to serve you.

Sincerely,

Mike Novielli